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GlaxoSmithKline supplies an estimated seven per cent of the world's pharmaceutical market and has six major disease areas – asthma, virus control, infections, mental health, diabetes and digestive conditions.
GlaxoSmithKline shares resilient to US$3 bln fine
July 03 2012, 11:44am
Drugs giant GlaxoSmithKline (LON:GSK) shares today shrugged off its huge fine for the largest healthcare fraud case in US history.
Seymour Pierce said it remained a buyer regardless of a potentially tarnished reputation from the affair.
The shares were relatively unaffected today as the pharmaceutical said it has sufficient provisions to cover the US$3 bln settlement.
Seymour Pierce analyst Dr Mike Mitchell said: “The finalisation of the terms of the settlement draws a line under this episode, which will be resolved within the existing pre-tax provision.”
After the fine, for criminal and civil violations, GSK said the post-tax cost will be approximately US$150 million lower than provided and credit will be recorded in the non-core tax charge for the second quarter of 2012.
The US Attorney’s office of Colorado started looking into the mis-selling and marketing of nine GSK products in 2004. The case also investigated the marketing and regulatory submissions of diabetes drug Avandia.
Glaxo will plead guilty to the promotion of anti-depressant drugs Paxil and Wellbutrin for unapproved uses, including for treatment of children. This illegal practice is known as ‘off-label marketing’.
GSK will also accept responsibility for failing to report safety problems with diabetes drug Avandia to US regulators.
Avandia was restricted in the US and banned in Europe after it was found in 2007 to sharply increase the risks of heart attacks and congestive heart failure.
The case was originally brought to attention by two whistle-blowers, former GSK sales representatives Greg Thorpe and Blair Hamrick.
It has been reported that the pair and two other whistle-blowers will receive a portion of the financial settlement.
The US$ 3 billion penalty comprises a US$1 billion criminal fine and US$2 billion to resolve civil claims.
The settlement is due to be approved at a hearing on Thursday in U.S. District Court in Boston. As part of the settlement Glaxo agreed to be monitored by the government for five years to ensure that it complies with marketing and other rules.
Chief executive Sir Andrew Witty said procedures for compliance, marketing and selling had been changed at GSK's US unit.
"We have learnt from the mistakes that were made," Witty said.
"When necessary, we have removed employees who have engaged in misconduct."
The share price is down 0.1 per cent to 1470.5 pence.
